PPI continues to plague Lloyds and now Barclays

Eric Moore, fund manager at Miton Group, talks to IGTV’s Victoria Scholar about the UK banks’ earnings this quarter.

Barclays

Barclays see-sawed in the hours after its quarterly earnings release, with shares ultimately ending the day’s trade in the red. The British bank reported a first quarter (Q1) loss of £236 million, swinging from a profit of £1.68 billion in the same period last year. A £1.4 billion settlement with the US Department of Justice relating to legacy mortgage-backed securities mis-selling was to blame. The bulls argue that by stripping out the charge, Barclays’ net profit more than doubled and beat the Street.

Meanwhile, there was an unexpected sharp rise to £400 million in charges relating to payment protection insurance (PPI) as the deadline for claims draws closer next year, which took analysts by surprise. Barclays stuck to its plans to pay a 6.5p dividend this year. In the quarter it was announced that CEO Jes Staley would have to pay a fine over the recent whistleblower episode. This comes as a positive development for Barclays, as it was feared he could have lost his job.

Lloyds

Lloyds reported pre-tax profit up 23% to £1.6 billion, from £1.3 billion last year; slightly below expectations. Net interest margins (NIM) were a bright spot, increasing from 2.8% to 2.93%.

The UK lender announced another £90 million provisions for the PPI mis-selling legacy issue. The bank announced a three-year digitalisation investment plan earlier this year, worth £3 billion, as it looks to put the PPI scandal behind it and take part in a broadening trend of increased investment in technology. Recently, Lloyds announced further job cuts and branch closures as it aims to slim down costs.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.